Star Volunteer Spotlight
Article of the Month
MANAGING CLOSURE PROCESSES AFTER INVOLUNTARY PROJECT TERMINATION
PARTHA S. GHOSE
A highly daunting situation that a project manager and the project team face is with the involuntary stoppage of a project, particularly if it is a large and complex greenfield project. The aftershocks of such a closure with respect to team morale, handling internal stakeholders, and managing cost till closure are so complex that managing the entire gamut of issues needs a strategic and systematic project management system that covers almost all the processes in a normal project management framework.
This brief articulation is based on lessons learned from the involuntary termination of a large industrial project. It touches upon the major reasons for such termination and how it unfolds a new phase to be managed using project management principles in an environment where negative sentiments prevail.
Major Reasons for Project Cancellation
Projects, particularly large greenfield projects, are undertaken after a detailed study and analysis of the business environment. The business case considers factors such as the market, technological and environmental aspects, risks, and funding. However, even a detailed analysis does not preclude the project from uncertainties or unknown risks. Sometimes these risks arise with such severity that there is no option left but to cancel the project. The following are some of those conditions:
Inefficient project management resulting in major cost overruns and a funding crisis;
Land acquisition issues, including delay in getting regulatory clearances;
Non-allocation or de-allocation of natural resources and/or infrastructure support as promised by the government because of changes in the political environment or a shift in government policies and priorities;
Stiff resistance by external stakeholders, particularly Project-Affected Persons (PAPs), associated with rehabilitation, resettlement, or engagement issues;
Project funding issues resulting from the promoter’s inability to infuse equity, wrongly estimated budget, uncontrolled scope creep, fund mismanagement, or a global economic slowdown; and
The management changing hands, leading to a shift in business priorities.
Project Management After Project Cancellation
Whatever be the reason to cancel a project midway, the project does not suddenly stop; only its objectives and course change. There are several premature and unfinished activities across various facets of the project that are left hanging. The following are some such activities that require the project team’s time and effort even after the project has been cancelled:
Land acquisition process and security:
Examining land acquisition status and deciding on where to stop the process within the legal framework; and
Protection of land and physical demarcation to prevent intrusions and encroachments, and ensuring security of the already procured machineries.
Manufacturing work in progress (WIP):
In large industrial projects, orders for a substantial number of work packages might have been placed with multiple vendors across geographies which, depending on the schedule and complexity, would be in different stages of manufacturing. Many of these processes cannot be stopped suddenly because of techno-commercial reasons. The team would require to follow these process steps:
Auditing and assessment of the WIP stage;
Techno-commercial decision on the process termination points and issuance of termination intimation within the contractual framework; and
Negotiation and settlement of the terms and conditions for short closure, followed by a formal short closing.
Consultancy, design and engineering WIP:
Large industrial projects involve significant design and engineering work across engineering disciplines. On deciding a project’s termination, this colossal activity has to be stopped and a commercial settlement reached with service providers, triggering the following actions:
A notification advising the immediate putting on hold of engineering activities needs to be served to prevent further manpower deployment for these activities; and
Subsequently, the engineering hours already spent until the notice, as logged by the service provider, are to be analyzed and settled to create a basis for negotiation, and finally, a commercial settlement reached.
Closing of construction activities:
Unlike design and engineering activities, construction activities cannot be terminated all of a sudden, since such action can be unsafe and disastrous, particularly in the case of civil and structural work.
For civil and structural works, the exact stage of WIP for all the areas has to be assessed and the immediate next stage of termination of work determined, which may involve some additional and enabling work. For example, a building structure under erection must be completed up to a stage where it is safe;
Likewise, if excavation has been done to construct a foundation, it should be either back filled or provided with appropriate support and platform to prevent the risk of collapse;
In the case of equipment erection, the stage of erection must be assessed after a proper audit and a safe stage of erection has to be reached;
Some of the equipment may have to be deerected, cleaned, packed, and kept in safe custody; and
Mothballing of some equipment may also be essential.
Foreclosure of contracts and purchase order (PO):
Post an audit and assessment and having taken the decision for pre-closure of the various contracts and POs, the contracts and POs have to be foreclosed. A contract cannot be foreclosed unilaterally and arbitrarily without the consent of the contractor or the vendor.
The contractor/vendor should be notified about the pre-closure and invited for commercial discussion and negotiation within the contractual framework for an amicable settlement; and
Eventually, a pre-closure agreement should be executed as the final documentation of the process.
Project team separation:
As per Robert K. Hurley and Joseph T. Jimmerson (2009) who quote Jerry B. Harvey, in their article1, project managers and team members are susceptible to experiencing anaclitic depression when individuals, organizations, or belief systems that they lean on for emotional support are withdrawn from them. Added to that is a sense of insecurity.
Hence, breaking a project team and releasing individuals in such a sensitive atmosphere is one of the most challenging tasks for an organization. It is therefore imperative that the entire resource allocation in the organization is critically reviewed, and a strategy for redeployment and a soft separation package with organizational humility drawn up and implemented.
Managing external stakeholders:
The psychological state of the external stakeholders of the project tends to be delicate, particularly in the case of PAPs who would have sold their land for the project, or those whose means of livelihood have been affected by it. Their employment and growth prospects — directly and indirectly — are badly affected by the cancellation of the project. Their frustration and anger can erupt in the form of an agitation. Managing such stakeholders is not easy and would need a different stakeholder engagement plan to be executed with the support of the management and the state.
Organizations do not cancel projects — circumstances do. Whatever be the reasons, when a project is cancelled, a new phase unfolds that is beyond the current project management plan. That phase needs to be managed in a structured manner by employing project management principles like the ones originally used, but with a different set of issues and objectives
However, not all the reasons cited for premature project cancellation occur simultaneously in a project. What occurs frequently in most of the projects is project management failure.
Organizations, therefore, must adapt their project management methodology to ensure project success, and apply the same principles to a project if it is cancelled, along with drawing up a detailed lesson-learned document for future reference.
Robert K. Hurley and Joseph T. Jimmerson (2009), Managing the Trauma of a Terminated Project. Extracted from:
Kenneth Darter (2013), Cancelling a Project, Project management.com. Extracted from
(Partha S. Ghose, PMP, president - project division, Kalyani Steels Ltd., has 42 years of experience in managing large industrial projects in the metals and mining sector. He is a writer and speaker who likes to disseminate his learnings to the project management community.)
Download Magazine PDF
OTHER By Invitation
HOW TO SKILL INDIA?
Ms. Alakananda Rao
DEMAND A DEMANDING ROLE, AND PROVE YOURSELF
CONVERSATIONS WITH SENIOR PRACTITIONERS
By PMI India
Tweets by PMInstitute